Heineken Sees Weak Europe Beer Consumption Weighing on Sales

A worker closes the door of a delivery truck operated by Cuauhtemoc-Moctezuma, a subsidiary of Heineken NV, in Mexico City. Photographer: Susana Gonzalez/Bloomberg

Aug. 21 (Bloomberg) -- Heineken NV, the world’s third-biggest brewer, said poor spring weather in Europe led to weak
second-quarter revenue and predicted that earnings this year
won’t grow as consumers in the region curb spending.

The company witnessed a “further moderation versus what we
had expected after the first quarter,” Chief Executive Officer
Jean-Francois van Boxmeer said today on a call with reporters.
The second quarter was “clearly below” company expectations
“and that will have an impact on total outlook for the year.”

Group beer volume fell 3 percent in the first half on an
organic basis, the Amsterdam-based brewer said in a statement,
led by a 8 percent decline in western Europe after an increase
in French beer taxes and a prolonged spell of cool weather.
Heineken had said in April that revenue and volume would improve
this year more slowly than previously anticipated.

The company said it expects no organic growth this year in
net income before some items. That’s less than estimated by
Sanford C. Bernstein analysts, who had anticipated a low single-digit increase before today’s report. First-half profit on that
basis fell to 679 million euros ($911 million) from 688 million
euros a year earlier, Heineken said.

Constrained Spending

Heineken fell as much as 3.9 percent in Amsterdam trading,
the steepest drop since June 20. The shares were down 3.4
percent at 53.61 euros as of 9:36 a.m.

Heineken today raised its cost-saving target to 625 million
euros between 2012 and 2014, which it will achieve through more
efficient purchasing of commodities and services. It had
previously forecast reductions of 525 million euros.

“The good news is that the cost savings are ahead of
expectations, but the bad news is it’s still struggling with
tough markets and a couple of months of good weather isn’t going
to offset a bad spring,” Trevor Stirling, an analyst at
Bernstein, said by telephone.

European competitor Carlsberg A/S today also reported
second-quarter profit that missed estimates and lowered its
forecast for beer market growth in Russia, its biggest region.
The Copenhagen-based maker of Tuborg maintained its outlook for
profit this year as it offset “challenging market conditions in
western and eastern Europe” with cost-cutting measures.

Heineken has been seeking to combat waning sales in Europe
with more profitable new products and cost-cutting measures as
drinkers veer toward wine or spirits. The brewer said today it
got 6 percent of revenue from new products in the first half.

Economic Uncertainty

Economic uncertainty and weak consumer sentiment will
persist across many key markets, Heineken said, even after it
benefited from better European weather in July. It said it
doesn’t expect a “material change to underlying trading
conditions” across the majority of its regions.

Adjusted earnings before interest and taxation excluding
some items rose to 1.33 billion euros from 1.15 billion euros.
That compared with a median estimate for 1.34 billion euros.

The brewer, which makes beverages including Amstel and Sol,
is seeking to expand in regions outside western Europe. Last
year, it bought a joint-venture partner’s stake in Asia Pacific
Breweries for S$5.6 billion ($4.4 billion) to gain control over
a business stretching across markets including Vietnam.

Operating profit in developing markets rose 7 percent in
the first half. Emerging countries comprise about half of total
group earnings.